3 Benefits of Holding a Property in an LLC

June 4, 2015 by

hand and houseHolding real estate in a limited liability corporation (LLC) could be a good option for your property investments.  There are some real benefits to this type of structure, both from a tax and legal perspectives.  Consider the following:

1.  Provides protection from personal liability to all members.

2.  Provides the tax benefits of a partnership.

3.  Provides charging order protection to help shield the assets of the LLC.

Please note, we are not tax professionals or attorneys so ALWAYS check with your trusted professionals for your specific situation.  In most cases, holding property in an LLC will provide good protection for your personal and investment property.

Please click like if you hold any property in an LLC.

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Does it really need to be replaced?

May 7, 2015 by
Yummy bread baking in an oven

Image courtesy of stockimages at freedigitalphotos.ne

If you own rental property, you’ll want to make smart financial decisions regarding your properties.  One decision that you have some control over is whether to repair or replace items that are no longer working.  Just because an item is broken doesn’t necessarily mean it should be replaced.

Do a little bit of investigation, first.  A search on the internet can usually tell you if others are having the same problem and provide potential solutions.  Sometimes a recall has been issued and you can get the item repaired for free.  Either way you will probably find useful information on an internet search.  There may even be a quick fix for it.

Is the appliance still under warranty?  I know that you are a diligent property owner and have retained your receipts to make that determination.  If so, look to have the repair covered under warranty.

If none of these yield results,  having someone on your team who can quickly determine the best course of action is essential.  Of course if that appliance is really old and decrepit lay it to rest and buy a new one.  You certainly don’t want to keep investing money in something that is near the end of its life.

We personally have learned that residents can get attached to their current appliances and many times would rather fix what they have than have it replaced.  How about just replacing the burnt out heating element for $15 in the dish washer instead of buying a new one?  Or checking why the freezer isn’t making ice, it could simply be a filter that needs replacing.

Be sure to carefully check out what is really causing the trouble and make smart decisions!

Please write in the comments section about an interesting repair or replace story.

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Try commercial?

April 29, 2015 by
Beautiful office building windows reflecting the sky

Image courtesy of mapichai at freedigitalphotos.net

In real estate investing, the focus should be finding “GREAT” deals.   Never fall in love with a property.  The numbers must work.  Close your eyes and run the numbers.  In most cases it takes time  to realize a good return on a real estate investment but it’s worth the wait.

Take a look at the cap rate or capitalization rate.  The cap rate is the return on the property based on the income it will generate.  It is used to estimate the potential return on investment.

To calculate the cap rate, divide the net income by the total value of the property.  Keep in mind that as the property value increases your cap rate will decrease, which at first glance would seem like a bad thing, but it isn’t because your property has increased in value resulting in an increase of your net worth.  When this happens sometimes it’s good to sell the property and invest again!

Please share the cap rate of your investments in the comments section if you have commercial property.

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Staging to sell

April 23, 2015 by
Image courtesy of Gualberto107 from freedigitalphotos.net

Image courtesy of Gualberto107 from freedigitalphotos.net

It is important to command attention and maintain that attention in order to sell.  The same is true when selling a house.  There must be some features in the house that elicit “WOWS” from your audience or you could lose their attention.  Home staging can make that happen.

It starts from the moment the potential buyer pulls up to the house.  That first impression is extremely important.  Be certain all the grounds are well maintained, grass is freshly cut, plants are new and not over grown.  Add a “WOW” factor if needed, maybe some amazing, inviting flowers or a water feature.

The house should be light and bright with a good flow.  Eliminate all clutter and personal touches, so that the buyers  can envision their stuff in the house.  Less is more.

Just when you think the house is ready to be shown, go in each room and identify the “WOW” feature in each room.  If you can’t find it, neither will the buyer.  Be sure each room has something that makes it memorable, then you are ready to sell!

What are some of the “WOW” features in your home?

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The old switcheroo

April 16, 2015 by
Swapping for a higher priced property

Image courtesy of Stuart Miles at freedigitalphotos.net

Since today is the day after US income taxes are due, now is a good time to remember it is never too early to plan your tax strategy.  If you are investing in real estate you need a good CPA and to be familiar with section 1031 of the IRS code.

We are not tax professionals, so always consult your trusted CPA to provide the nitty gritty of the rules, but this opportunity applies to like kind exchanges of property.  Section 1031 allows you to postpone paying tax on the gain if you sell a property and reinvest the proceeds in a similar, higher priced property.  Remember, it is not tax free but tax deferred.

There are time limits on taking advantage of a 1031 exchange.  First, you must identify potential replacement properties within 45 days from the date you sell the relinquished property.  Second, the replacement property must be received and exchanged within a specified amount of time.

This is a great opportunity for a real estate investor to keep rolling proceeds forward into more expensive properties without immediate tax consequences.  Your net worth will soar!

Have you taken advantage of a 1031 exchange?  If so, please comment your experiences here!

 

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How to get a handle on your insurance coverage

April 9, 2015 by

There were tons of great tips from super sales representative Rachel Foley from Liberty Mutual Insurance last Thursday on our monthly webinar.  One of which was to require residents that live in your investment property to have a renter’s insurance policy.  Having this type of insurance protects the resident AND the landlord.

Of course there was more info on auto, home, umbrella and life insurance as well.  There is something for everyone.  Listen in for the details!

Please share with others who can benefit from this information and click like if you found it informative.

 

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Invest in real estate without the leg work

April 2, 2015 by
Image courtesy of hywards at freedigitalphotos.net

Image courtesy of hywards at freedigitalphotos.net

Nervous about buying a property, rehabbing it then either selling it or renting it out?  Just not cut out to be the big, bad landlord or seller?  What if you could just invest in real estate without the leg work?  You can!

The vehicle for this type of investment is called “real estate investment trusts” or REIT.  A REIT can buy, develop, manage and sell assets in real estate.  It is similar to other security offerings but instead of investing in a single company, you are purchasing a portion of a managed pool of real estate.

This pool of real estate can generate income through renting, leasing and selling of property.  Then fund distribution occurs regularly to the REIT holder.  Some very good news is that REITs MUST distribute at least 90% of their yearly taxable income, to their shareholders in the form of dividends.  Nice!

Investing in REITs is a good way to get diversification without the leg work.  Sit back and let someone else do it!

Please comment your thoughts on REITs.

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Investigate options

March 25, 2015 by
Image courtesy of iosphere at freedigitalphotos.net

Image courtesy of iosphere at freedigitalphotos.net

There are many different ways to invest in the stock market. Would you consider investing in “the right” to buy an asset?  If you trade stock options, you are buying the right to buy shares of stock.  The definition of an option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.

This scenario may help to further clarify how options work… The good new is you have finally found your dream home! The bad news is you don’t have enough cash to buy it. You decide to try to strike a deal with the owner that gives you the OPTION to buy the house for $400,000 in six months after you come up with the cash.   For this OPTION you pay the owner $6,000.

Consider these two potential story lines:

  1. During an inspection, the inspector comes across a stream in the back yard that is FULL OF GOLD! The property is now worth $5 million and because you purchased the option, the owner is obligated to sell you the house for $400,000. The profit on this transaction would now be $4,594,000 ($5 million – $400,000 – $6,000).
  2. During an inspection, the inspector comes across waste oil that has contaminated the soil. The cleanup costs will run into the millions. What you thought was your dream home now turns out to be your worst nightmare. But don’t fret! Because you bought an option you are not obligated to purchase the property. You will however lose the $6,000 you paid for the option but you have saved millions!

Options are derivatives; they derive their value from something else. With stock options, most of the time, the underlying asset is a stock or an index.  Click here to learn more about stock options!

Please click like if you trade stock options.

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What’s under your feet?

March 24, 2015 by
Image courtesy of twobee from freedigitalphotos.net

Image courtesy of twobee from freedigitalphotos.net

Carpet can be warm and fuzzy, but is it the best floor covering in a rental unit? Maybe not. Carpet is extremely absorbent so any liquid spilled can stain or stink up the room.

Hardwood can splinter, stain, warp, and buckle. However, it is a higher end flooring and is typically sought after by potential residents. A good buffing after a resident leaves usually is enough to entice a new resident.

Tile, if installed properly in a level floor can last a very long time. It is very durable and a good scrubbing can make it look new again. It can also be slippery and cold which could turn some residents off.

A great product we have found for flooring is called Allure from Home Depot. It is inexpensive, highly durable, water resistant, and looks great. This floating floor can be easily installed over an existing floor and has many different styles for different applications. It is definitely worth considering when flooring needs to be replaced.

Please share what is on YOUR floor!

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Want to be “in the know”?

March 17, 2015 by
Image courtesy of stockimages from freedigitalphotos.net

Image courtesy of stockimages from freedigitalphotos.net

How do you find out what is going on in the real estate market you are targeting?  Some can be learned from your real estate professional, but that is only one person’s perspective.  Why not get the perspective of many people in the real estate industry in your target market?  Where would you go?

The local Real Estate Investor’s Association meeting!  There are real estate investment groups meeting all around the country.  The National Real Estate Investor’s Association website can direct you to a meeting in your target area.  Check one out!  These meetings can be a great resource to gain knowledge about your area, find deals or help build your team.

Please comment any real estate tips or tricks that you have learned from a real estate investor’s meeting.

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